Wall Street analysts expect the S&P 500 to rise 10% over the next year as the reflation trade picks up pace

• The S&P 500 will rise 9.6% from Monday's closing price over the next 12 months, analysts estimate.
• Analysts think energy and materials stocks will fare best amid strong growth, FactSet data showed.
• The S&P 500 has consistently hit new highs as US growth roars and stimulus continues.

The S&P 500 has rallied sharply over the last year to hit repeated record highs - but Wall Street analysts are backing the benchmark US stock index to continue its ascent.

Industry analysts on average expect the S&P 500 to rise 9.6% from Monday's closing price of 4,384.6 over the next 12 months to hit 4,803.6, according to data compiled by FactSet.

A 9.6% rise would be considerably slower than the 37% increase the S&P 500 has experienced over the last 12 months. But it would nonetheless represent a solid gain at a time when some investors are questioning whether US stocks can continue their stellar rally.

FactSet, a data company which aggregates industry forecasts, said analysts expect the energy and materials sectors to see the biggest increase in stock prices. Analysts on average expect energy and materials stocks to rise 17% and 16% respectively from their closing prices on Thursday, when the data was compiled.

Both energy and materials are so-called cyclical sectors that are expected to benefit from the reopening of economies and stronger growth and inflation. Such sectors fared badly during the 2020 coronavirus pandemic but have rebounded in 2021.

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Many Wall Street analysts have predicted the so-called reflation trade to continue, despite the interest in cyclical stocks cooling in recent weeks. Inflation showed little sign of slowing on Tuesday, when data showed prices rose at the fastest rate since 2008 in June, at 5.4% year on year.

The BlackRock Investment Institute said in its recent mid-year outlook: "We lean further into cyclicality to capture potential upside as the broadening pickup in economic activity boosts corporate earnings expectations."

However, BlackRock said it was becoming more selective about US stocks as it expects growth to peak in the coming months after the rapid rebound in the first half of the year.

Analysts at LPL Financial said in its mid-year outlook: "Economic improvement should continue to support S&P 500 Index earnings, which had a stunning first quarter.

"While valuations remain somewhat elevated, we think they look reasonable after considering still low interest rates and earnings growth potential."